Microsoft’s App Deficit Disorder

Why It Matters

Microsoft’s latest mobile operating system could give consumers a radically different alternative to Apple’s iOS and Google’s Android.

App challenge: Antoine Leblond, corporate vice president, Windows Web Services, shows off new apps in the Windows Store as part of the Windows 8 Consumer Preview event in Barcelona, Spain, in February.

In the crowd at Microsoft’s Build conference, where more than 2,000 software developers gathered in Redmond, Washington, this week, sat Atta Elayyan, cofounder of a two-person New Zealand startup called Lazyworm Apps. Although low-profile, the event was one of the most important for Microsoft this year—with desktop and laptop sales shrinking and other companies far more successful in mobile computing, Microsoft badly needs to persuade software developers like Elayyan that it’s worth writing code for its latest platforms.

Elayyan has built Metrotube, a stylish YouTube video app for Windows phones, and now Tweetro, a widely praised Twitter app for Windows 8, Microsoft’s touch-screen-focused operating system that is designed to bridge the divide between PCs and tablets and phones. Elayyan hopes to work on more of what Microsoft has lately termed “modern-style” apps, and is among the more enthusiastic developers creating software for the new Windows platforms.

“We haven’t made much money yet,” says Elayyan, who is balancing a full-time job with his startup on the side. “When the platform does succeed, hopefully we can monetize.”

It is indeed a perilous time for Microsoft when a young designer working on little sleep halfway around the world builds a Twitter app for its new operating system before Twitter itself bothers to. On Tuesday, Twitter announced that it would develop a Windows 8 app, but at a rather leisurely pace over the next few months.

Microsoft is desperately behind in mobile and it needs to woo all kinds of software developers if it is to have any hope of catching Apple and Google, which lead the market for mobile operating systems with iOS and Android, respectively. The company has worked well with PC software builders for decades. But now, with users more interested in portable apps than desktop software, its still-nascent app ecosystem is one of the company’s most glaring weaknesses.

One of the key problems could be convincing users and developers to accept another mobile platform and app ecosystem. “Developers have only reluctantly accepted a very much two-horse race within mobile,” says Jason Armitage, a principal analyst at Yankee Group, referring to iOS and Android. “Microsoft has time, but it has to work quickly.”

Microsoft’s new Windows Store, the place to find new apps, was stocked with more than 9,000 offerings globally when it launched last Friday, and it is up to more than 10,000 this week, according Wes Miller, an analyst who has been tracking counts. Only about half of these are available in China or the U.S., the two highest counts of any countries. Games are the biggest of any one category, but some types of app, such as a good RSS reader, or social apps like Facebook and Quora, are missing altogether, Miller says.

At a Friday event, the phrase “grand opening” was bandied about. But specifics on the store’s progress were slim, and Microsoft hasn’t provided its own count. “It looked very much like a soft launch,” says Armitage.

Microsoft was more specific at its Windows Phone 8 launch on Monday. New phones running this software can also use apps built for previous versions of the operating system. There are now 120,000 Windows Phone apps and, importantly, among them are 46 of the top 50 apps available in other app stores, as Joe Belfiore, manager of the Windows Phone Program at Microsoft, noted on Monday. But still, the total is a far cry from Google’s and Apple’s stock of 700,000.

Although any individual interacts with only about 10 apps regularly, there is a “long tail,” says Armitage, with a few of those 10 apps relatively unique to a person’s location, hobbies, or occupation. That’s where the hundreds of thousands of apps beyond offerings like Netflix or ESPN—both big-name titles that already launched in the Windows 8 Store—could make or break whether a consumer will buy a Windows device. If consumers don’t see apps they use frequently, like a specific game or transit app, they might not buy a Windows device.

As a result, the smaller number of apps could dampen enthusiasm for Microsoft’s new Windows 8-powered device, called Surface, and for other tablet devices that use a version of Windows 8 called Windows RT. While other Windows 8 PCs and devices can still run older desktop software, Surface and Windows RT devices can only use Windows Store applications.

More importantly, Microsoft wants to build and have more control over an app “ecosystem” across all devices. Last week, for example, it launched an app that syncs Windows 8 phones, tablets, and PCs.

Even for large companies, it’s not cheap to develop a Windows 8 app; the cost can be hundreds of thousands of dollars. New kinds of apps are crucial, and why, as Miller says, Microsoft needs to build a “virtuous cycle” of developers building apps and then consumers wanting to buy the devices.

While many developers wait and see, Microsoft certainly wooed some at Build. It gave out Surface tablets and Nokia 920 phones, and drew applause at its big-spending advertising campaign for its new products. It is also offering slightly better (though largely similar) revenue-sharing terms compared to Apple.

Microsoft’s Steve Ballmer and other executives also like to tout the huge existing Windows desktop audience—even though it’s unclear how many of these consumers will upgrade to Windows 8 (four million have done so already), or how many will use the new touch-optimized apps.

There is, at least, early hope that developers will see the numbers they are seeking, and some see a lack of competition as an advantage. Tweetro was downloaded 140,000 times before the Windows Store publicly launched (it was made available to early adopters). A few days later, it’s up to 177,000 unique downloads, what Elayyan called a huge spike, and one that would be harder to achieve with a similar offering in a more crowded marketplace. “These fresh platforms have given us an opportunity,” he says.